The following information should be read in conjunction with the unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this report, particularly in "Forward-Looking Statements" and the section entitled "Risk Factors" included herein and in the Annual Report on Form 10-K for the fiscal year ended December 29, 2019.

Overview

SiteOne Landscape Supply, Inc. (collectively with all of its subsidiaries referred to in this Quarterly Report on Form 10-Q as "SiteOne," the "Company," "we," "us," and "our") indirectly owns 100% of the membership interest in SiteOne Landscape Supply Holding, LLC ("Landscape Holding"). Landscape Holding is the parent and sole owner of SiteOne Landscape Supply, LLC ("Landscape"). We are the largest and only national wholesale distributor of landscape supplies in the United States and have a growing presence in Canada. Our customers are primarily residential and commercial landscape professionals who specialize in the design, installation and maintenance of lawns, gardens, golf courses, and other outdoor spaces. Through our expansive North American network of over 550 branch locations in 45 U.S. states and six Canadian provinces, we offer a comprehensive selection of more than 120,000 SKUs, including irrigation supplies, fertilizer and control products (e.g., herbicides), landscape accessories, nursery goods, hardscapes (including pavers, natural stone, and blocks), outdoor lighting, and ice melt products to green industry professionals. We also provide value-added consultative services to complement our product offerings and to help our customers operate and grow their businesses.

Impact of COVID-19 on Our Business

With the global outbreak of the novel coronavirus, COVID-19, and the declaration of a pandemic by the World Health Organization on March 11, 2020, we are keeping the safety of our associates, customers, and suppliers as our top priority while striving to continue to deliver quality products and exceptional service to our customers and communities. We are monitoring developments and following appropriate recommendations from health and government authorities while proactively seeking to implement safe behaviors, minimize potential exposures, and facilitate safe and healthy environments in our branches and other facilities.

The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and has and will likely continue to negatively affect our business. As of the date of this Quarterly Report, significant uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic. Factors arising from the COVID-19 response that have or may negatively impact sales and gross margin in the future include, but are not limited to: limitations on the ability of our suppliers to manufacture, or procure from manufacturers, the products we sell, or to meet delivery requirements and commitments; limitations on the ability of our employees to perform their work due to impacts caused by the pandemic or local, state, or federal orders that restrict our operations or the operations of our customers; limitations on the ability of carriers to deliver our products to our branches and customers; limitations on the ability of our customers to conduct their business and purchase our products and services; decreased demand for our customers' services; and limitations on the ability of our customers to pay us on a timely basis. While our branches and other facilities continue to operate, the COVID-19 pandemic and accompanying economic disruption have negatively impacted sales beginning at the end of the first quarter. We have experienced a decline in Organic Daily Sales of approximately 11% in April 2020 compared to the same period of 2019 as of the date of this filing. The decline has been consistent from the last week of the first quarter. We expect this trend to continue in the near-term given government mandated COVID-19 related restrictions and anticipate an improvement in demand when restrictions are eased and the COVID-19 pandemic and associated economic impacts moderate.

In response to the negative sales trend, we are evaluating and taking actions to reduce costs and spending across our organization. This includes reducing hiring activities, furloughing employees, and limiting discretionary spending. We have reduced and paused anticipated spending on capital investment projects, including the postponement of pending acquisitions, without sacrificing significant long-term growth or market opportunities.

Although there have been operational and other challenges to date, as well as lower sales at the end of the first quarter through the date of this filing, there has been no material adverse impact on our first quarter 2020 results of operations. We currently believe we have sufficient liquidity on hand to continue business operations during this volatile period. As disclosed in the Liquidity and Capital Resources section below, we had total available liquidity of approximately $177 million as of March 29, 2020, consisting of cash on hand and available capacity under an asset-based credit facility (the "ABL Facility"). In addition, on April 1, 2020, we borrowed approximately $100 million on our ABL Facility to enhance our cash position and increase our financial flexibility should market conditions continue to deteriorate. As of April 27, 2020, we have approximately $122 million of cash on hand and approximately



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$47 million in available capacity under our ABL Facility. In addition, we have no debt maturities under our credit facilities until 2024.

We will continue to actively monitor the COVID-19 pandemic and may take further actions that alter our business operations if required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers, and shareholders. While we are unable to determine or predict the nature, duration, or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity, or capital resources, we believe that it is important to provide this update on our Company, how our response to COVID-19 is progressing, and how our operations and financial condition may change as the fight against COVID-19 progresses. The situation surrounding COVID-19 remains fluid and the potential for a material impact to our Company increases the longer the virus impacts the level of economic activity in the United States and globally. For this reason, we cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on our results of operations, financial position, and liquidity. See Part II, Item 1A. - "Risk Factors", for a discussion of risks which could have a material adverse effect on our operations and financial results.

Presentation


Our financial statements included in this report have been prepared in
accordance with generally accepted accounting principles in the United States of
America ("GAAP"). We use a 52/53 week fiscal year with the fiscal year ending on
the Sunday nearest to December 31 in each year. Our fiscal quarters end on the
Sunday nearest to March 31, June 30, and September 30, respectively.
The discussion of our financial condition is presented for the three months
ended March 29, 2020, which included 13 weeks and 65 Selling Days, and the three
months ended March 31, 2019, which included 13 weeks and 64 Selling Days.
"Selling Days" are defined below within the Key Business and Performance Metrics
section.
We manage our business as a single reportable segment. Within our organizational
framework, the same operational resources support multiple geographic regions
and performance is evaluated at a consolidated level. We also evaluate
performance based on discrete financial information on a regional basis. Since
all of our regions have similar operations and share similar economic
characteristics, we aggregate regions into a single operating and reportable
segment. These similarities include (1) long-term financial performance, (2) the
nature of products and services, (3) the types of customers we sell to, and (4)
the distribution methods utilized.
Key Business and Performance Metrics
We focus on a variety of indicators and key operating and financial metrics to
monitor the financial condition and performance of our business. These metrics
include:
Net sales. We generate Net sales primarily through the sale of landscape
supplies, including irrigation systems, fertilizer and control products,
landscape accessories, nursery goods, hardscapes, and outdoor lighting to our
customers who are primarily landscape contractors serving the residential and
commercial construction sectors. Our Net sales include billings for freight and
handling charges and commissions on the sale of control products that we sell as
an agent. Net sales are presented net of any discounts, returns, customer
rebates, and sales or other revenue-based taxes.
Non-GAAP Organic Sales. In managing our business, we consider all growth,
including the opening of new greenfield branches, to be organic growth unless it
results from an acquisition. When we refer to Organic Sales growth, we include
increases in growth from newly-opened greenfield branches and decreases in
growth from closing existing branches, but exclude increases in growth from
acquired branches until they have been under our ownership for at least four
full fiscal quarters at the start of the fiscal reporting period.
Non-GAAP Selling Days. Selling Days are defined as business days, excluding
Saturdays, Sundays and holidays, that our branches are open during the
year. Depending upon the location and the season, our branches may be open on
Saturdays and Sundays; however, for consistency, those days have been excluded
from the calculation of Selling Days.
Non-GAAP Organic Daily Sales. We define Organic Daily Sales as Organic Sales
divided by the number of Selling Days in the relevant reporting period. We
believe Organic Sales growth and Organic Daily Sales growth are useful measures
for evaluating our performance as we may choose to open or close branches in any
given market depending upon the needs of our customers or our strategic growth
opportunities. Refer to "Results of Operations-Quarterly Results of Operations
Data" for a reconciliation of Organic Daily Sales to Net sales.
Cost of goods sold. Our Cost of goods sold includes all inventory costs, such as
purchase price paid to suppliers, net of any volume-based incentives, as well as
inbound freight and handling, and other costs associated with inventory. Our
Cost of goods sold

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excludes the cost to deliver the products to our customers through our branches, which is included in Selling, general and administrative expenses. Cost of goods sold is recognized primarily using the first-in, first-out method of accounting for the inventory sold. Gross profit and gross margin. We believe that Gross profit and gross margin are useful for evaluating our operating performance. We define Gross profit as Net sales less Cost of goods sold, exclusive of depreciation. We define gross margin as Gross profit divided by Net sales.

Selling, general and administrative expenses (operating expenses). Our operating expenses are primarily comprised of Selling, general and administrative costs, which include personnel expenses (salaries, wages, employee benefits, payroll taxes, stock-based compensation and bonuses), rent, fuel, vehicle maintenance costs, insurance, utilities, repairs and maintenance, and professional fees. Operating expenses also include depreciation and amortization.

Non-GAAP Adjusted EBITDA. In addition to the metrics discussed above, we believe that Adjusted EBITDA is useful for evaluating the operating performance and efficiency of our business. EBITDA represents our Net income (loss) plus the sum of income tax (benefit) expense, interest expense, net of interest income, and depreciation and amortization. Adjusted EBITDA represents EBITDA as further adjusted for items such as stock-based compensation expense, (gain) loss on sale of assets not in the ordinary course of business, other non-cash items, financing fees, other fees and expenses related to acquisitions and other non-recurring (income) loss. Refer to "Results of Operations-Quarterly Results of Operations Data" for more information about how we calculate EBITDA and Adjusted EBITDA and the limitations of those metrics.



Key Factors Affecting Our Operating Results
In addition to the metrics described above, a number of other important factors
may affect our results of operations in any given period.
Weather Conditions and Seasonality
In a typical year, our operating results are impacted by seasonality.
Historically, our Net sales and Net income have been higher in the second and
third quarters of each fiscal year due to favorable weather and longer daylight
conditions during these quarters. Our Net sales have been significantly lower in
the first and fourth quarters due to lower landscaping, irrigation, and turf
maintenance activities in these quarters, and we have historically incurred net
losses in these quarters. Seasonal variations in operating results may also be
significantly impacted by inclement weather conditions, such as snow storms, wet
weather, and hurricanes, which not only impact the demand for certain products
like fertilizer and ice melt, but also may delay construction projects where our
products are used.
Industry and Key Economic Conditions
Our business depends on demand from customers for landscape products and
services. The landscape supply industry includes a significant amount of
landscape products, such as irrigation systems, outdoor lighting, lawn care
supplies, nursery goods, and landscape accessories, for use in the construction
of newly built homes, commercial buildings, and recreational spaces. The
landscape distribution industry has historically grown in line with rates of
growth in residential housing and commercial building. The industry is also
affected by trends in home prices, home sales, and consumer spending. As general
economic conditions improve or deteriorate, consumption of these products and
services also tends to fluctuate. The landscape supply industry also includes a
significant amount of agronomics products such as fertilizer, herbicides, and
ice melt for use in maintaining existing landscapes or facilities. The use of
these products is also tied to general economic activity, but levels of sales
are not as closely correlated to construction markets.
Popular Consumer Trends
Preferences in housing, lifestyle, and environmental awareness can also impact
the overall level of demand and mix for the products we offer. Examples of
current trends we believe are important to our business include a heightened
interest in professional landscape services inspired by the popularity of home
and garden television shows and magazines, the increasingly popular concept of
"outdoor living," which has been a key driver of sales growth for our hardscapes
and outdoor lighting products, and the social focus on eco-friendly products
that promote water conservation, energy efficiency, and the adoption of "green"
standards.

Acquisitions

In addition to our organic growth, we continue to grow our business through acquisitions in an effort to better service our existing customers and to attract new customers. These acquisitions have allowed us to further broaden our product lines and extend our geographic reach and leadership positions in local markets. In accordance with GAAP, the results of the acquisitions are reflected in



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our financial statements from the date of acquisition forward. Additionally, we incur transaction costs in connection with identifying and completing acquisitions as well as ongoing integration costs as we integrate acquired companies and seek to achieve synergies. We completed the following acquisitions since the start of the 2019 fiscal year: • In March 2020, we acquired the assets and assumed the liabilities of Big Rock

Natural Stone and Hardscapes, Inc. ("Big Rock"). With one location in
    the greater Greenville, South Carolina market, Big Rock is a distributor of
    hardscapes and landscape supplies to landscape professionals.

• In January 2020, we acquired the assets and assumed the liabilities of The

Garden Dept. Corp. ("Garden Dept."). With three locations in the greater Long
    Island, New York market, Garden Dept. is a distributor of nursery and
    landscape supplies to landscape professionals.

• In January 2020, we acquired the assets and assumed the liabilities of Empire


    Supplies ("Empire"). With three locations in the greater Newark-Union, New
    Jersey market, Empire is a distributor of hardscapes and landscape supplies
    to landscape professionals.

• In January 2020, we acquired the assets and assumed the liabilities of

Wittkopf Landscape Supply ("Wittkopf"). With two locations in the Spokane
    Valley, Washington market, Wittkopf is a distributor of hardscapes and
    landscape supplies to landscape professionals.

• In December 2019, we acquired the assets and assumed the liabilities of

Daniel Stone & Landscaping Supplies, Inc. ("Daniel Stone"). With one location
    in the greater Austin, Texas market, Daniel Stone is a distributor of
    hardscapes and landscape supplies to landscape professionals.

• In December 2019, we acquired all of the members' interests of Dirt Doctors,


    Inc. ("Dirt Doctors"). With three locations in the greater New England
    market, Dirt Doctors is a distributor of hardscapes and landscape supplies to
    landscape professionals.

• In September 2019, we acquired the assets and assumed the liabilities of

Design Outdoor, Inc. ("Design Outdoor"). With one location in the greater
    Reno/Lake Tahoe, Nevada area, Design Outdoor is a distributor of hardscapes
    products to landscape professionals.

• In August 2019, we acquired the assets and assumed the liabilities of

Trendset Concrete Products, Inc. ("Trendset"). With one location in the
    greater Seattle, Washington market, Trendset is a distributor of hardscapes
    products to landscape professionals.

• In July 2019, we acquired the assets and assumed the liabilities of L.H. Voss


    Materials Dublin and its affiliates, Mt. Diablo Landscape Centers and Clark's
    Home & Garden (collectively, "Voss"). With five locations across the East Bay
    in Northern California, Voss is a distributor of hardscapes and landscape
    supplies to landscape professionals.

• In May 2019, we acquired the assets and assumed the liabilities of Stone and

Soil Depot, Inc. ("Stone and Soil"). With three locations in the greater San
    Antonio, Texas market, Stone and Soil is a market leader in the distribution
    of hardscapes and landscape supplies to landscape professionals.

• In April 2019, we acquired the assets and assumed the liabilities of Fisher's


    Landscape Depot ("Fisher's"). With two locations in Western Ontario, Canada,
    Fisher's is a market leader in the distribution of hardscapes and landscape
    supplies to landscape professionals.

• In April 2019, we acquired the assets and assumed the liabilities of

Landscape Depot, Inc. ("Landscape Depot"). With three locations in the
    greater Boston, Massachusetts market, Landscape Depot is a market leader in
    the distribution of hardscapes and landscape supplies to landscape
    professionals.

• In February 2019, we acquired the assets and assumed the liabilities of All

Pro Horticulture, Inc. ("All Pro"). With one location in Long Island, New
    York, All Pro is a market leader in the distribution of agronomics and
    erosion control products to landscape professionals.

• In January 2019, we acquired the assets and assumed the liabilities of


    Cutting Edge Curbing Sand & Rock ("Cutting Edge"). With one location in
    Phoenix, Arizona, Cutting Edge is a market leader in the distribution of
    hardscapes and landscape supplies to landscape professionals.




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Volume-Based Pricing

We generally procure our products through purchase orders rather than under long-term contracts with firm commitments. We work to develop strong relationships with a select group of suppliers that we target based on a number of factors, including brand and market recognition, price, quality, product support, service levels, delivery terms, and strategic positioning. We typically have annual supplier agreements, and while they generally do not provide for specific product pricing, many include volume-based financial incentives that we earn by meeting or exceeding purchase volume targets. Our ability to earn these volume-based incentives is an important factor in our financial results. In certain cases, we have entered into supply contracts with terms that exceed one year for the manufacture of our LESCO® branded fertilizer, some nursery goods, and grass seed, which may require us to purchase products in the future.

Strategic Initiatives

We continue to undertake operational initiatives, utilizing our scale to improve our profitability, enhance supply chain efficiency, strengthen our pricing and category management capabilities, streamline and refine our marketing process, and invest in more sophisticated information technology systems and data analytics. We are focusing on our procurement and supply chain management initiatives to better serve our customers and reduce sourcing costs. We are also implementing new inventory planning and stocking system functionalities and new transportation management systems in an effort to reduce costs as well as improve our reliability and level of service. In addition, we continue to enhance our website and B2B e-Commerce platform, which we believe provides the convenience of an online sales channel, enhanced account management functionality, and industry specific productivity tools for our customers. We also work closely with our local branches to improve sales, delivery, and branch productivity. We believe we will continue to benefit from the following initiatives, among others:

Pricing initiatives, including the development of a centralized pricing and discounting strategy and the implementation of data analytics to aid special pricing and bidding, were initiated beginning in the second quarter of 2015 and are expected to continue through 2021.

Category management initiatives, including the implementation of organic growth strategies, the development of our private label product strategy, the expansion of product lines, and the reorganization of brands and products by preferred suppliers, were initiated beginning in the first quarter of 2015 and are expected to continue through 2022.

Supply chain initiatives, including the implementation of new inventory planning and stocking systems, the installation of new distribution centers, local hubs in large markets, and local fleet utilization and cost improvement, were initiated in the fourth quarter of 2016 and are expected to continue through 2022.

Sales force performance initiatives, including the implementation of new compensation plans, the restructuring of our sales force, the formal sales and product training for sales force and management, and the implementation of a comprehensive CRM, were initiated beginning in the third quarter of 2015 and are expected to continue through 2022.

Marketing initiatives, including a relaunch of the Partners Program and implementation of a digital marketing strategy, were initiated beginning in the third quarter of 2015 and are expected to continue through 2022.

E-Commerce initiatives, including the relaunch of our website and the implementation of a B2B e-Commerce platform, which provides the convenience of an online sales channel, enhanced account management functionality, and industry specific productivity tools for our customers, are expected to continue through 2022.

Operational excellence initiatives, including the implementation of best practices in branch operations which encompasses safety, merchandising, stocking and assortment, customer engagement, delivery, labor management, as well as branch systems automation and enhancement including the rollout of barcoding, are expected to continue through 2022.

Working Capital

In addition to affecting our Net sales, fluctuations in prices of supplies tend to result in changes in our reported inventories, trade receivables, and trade payables, even when our sales volumes and our rate of turnover of these working capital items remain relatively constant. Our business is characterized by a relatively high level of reported working capital, the effects of which can be compounded by changes in prices. Our working capital needs are exposed to these price fluctuations, as well as to fluctuations in our cost for transportation and distribution. We might not always be able to reflect these increases in our pricing. The strategic initiatives described above are designed to reduce our exposure to these fluctuations and maintain and improve our efficiency.



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